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Gold is finishing a base-building consolidation pattern, a Symmetrical Triangle, that is close to completion. Gold should breakout higher in early 2007, with $900 an upside target, perhaps by year end. The thing about Symmetrical Triangle patterns is, the direction that prices were headed going into the pattern will be the same direction when prices leave the triangle pattern — in this case up.
Gold finished the Minor degree wave 3 of Intermediate degree 1 up on May 12th at $730.40. Gold’s Minor degree wave 4 Symmetrical Triangle, which is a consolidation pattern of the Minor degree wave 3 rally that started back in 2001 and extended into the May 12th, 2006 top, is almost complete. Waves a through d within wave 4 are complete, with e down underway, possibly taking Gold down to the 600ish area. Waves a down and b up of e down are complete, with a final wave c of e down next. It is possible that wave e down is complete. If so, we will expect a breakout of Gold decisively above 640. If we get that, wave 5 up has started and we will add Gold to our conservative investment portfolio. Wave fives typically extend with precious metals, so for wave 5, $900 is not out of the realm of possibility for Gold. An alternate scenario (with diminishing probability) is that Gold may morph into a 3-3-5 Flat, meaning wave c down of 4 would drop toward 525ish or lower. If it drops much farther, then the alternate labeling shown above is likely occurring, a one degree larger correction, Intermediate 2 down. But if that alternate is occurring, wave 2 down would be on its last leg, wave c down. A rise above the May 2006 $730.40 would eliminate the alternate labeling. If this alternate is occurring, we will consider it a wonderful buying opportunity. However, we do not think it is occurring.
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